New York plans $1.60 per pack cigarette tax increase

ALBANY, N.Y. — New York plans a $1.60 increase per pack in the cigarette tax, making it the nation’s highest, as well a long-delayed plan to crack down on the sale of cigarettes by tribes to non-Indians, according to a bill Gov. David Paterson’s administration announced late Friday.

The plan also includes raising the tax on chewing tobacco, cigars, pipe tobacco and other tobacco products. The tax would increase to 75 percent of the wholesale price of those products, from 46 percent now.

New York state Budget Director Robert Megna said specifics are still being negotiated with legislative leaders and tribes in New York, but higher tobacco taxes will be part of an emergency spending bill Monday.

“Raising the tax, combined with the decision to collect the tax on Indian sales, together is probably the most important public health measure this state has taken in many years,” said Russ Sciandra, director of the Center for a Tobacco Free New York, a coalition of health groups.

Peter Slocum of the American Cancer Society called the tax plan “one of the most important public health measures of our time.”

But Paterson ventures into potentially dangerous territory in trying to tax sovereign tribes. “This is an act of economic violence against the native people of what is now New York state,” said Richard Nephew, chairman of the Seneca Nation’s legislative council. “The state is built on the graves and land sacrifices of our people.”

Lawmakers will either have to accept the whole package or reject the weekly emergency appropriation and shut down government. In two previous emergency appropriations they chose to avoid a shutdown of government. Government has run on weekly emergency appropriations because budget negotiations have failed. The budget was due April 1.

“Our anticipation is that extender will pass, that people will not want to shut down government,” Megna said.

New York state’s current cigarette tax is $2.75 a pack. A $4.35-per pack tax would surpass even Rhode Island’s tax of $3.46 per pack and $3 per pack in the state of Washington, according to the American Cancer Society.

The tobacco tax package is expected to raise $440 million for New York as it faces a $9.2 billion deficit. The increases are projected to provide $290 million in revenue. The collection from Indian sales is projected to bring in $150 million this year, Megna said.

New York Indian tribes have long refused to collect taxes on their cigarette sales to Indians and non-Indians in their many shops and Internet sites. For decades, governors have sought to collect the revenue estimated at hundreds of millions a year that also has hurt businesses not owned by Indians near tribal land.

Megna said the Paterson administration seeks to avoid the violence of a similar effort more than 20 years ago by requiring wholesalers to pay the tax. Burning tires at one point shut down the statewide Thruway highway where it ran through tribes, and there were shootings reported at several Indian communities.

“I think the way we structured the bill is a way to specifically avoid that,” Megna said. However, the bill also allows New York the option of issuing coupons to reimburse Indian smokers for the tax they paid, but that’s not Paterson’s preference.

Megna said collection taxes collections on Indian sales are scheduled to begin Sept. 1, pending more negotiations. The state believes Indian sales to Indians are tax exempt. “We’re working on agreements,” he said. “We’re trying to gain closure to this issue in the most inoffensive way to the Native Americans and the most unobtrusive way possible, so we’re trying to do that in a way that minimizes any impact on the tribes,” Megna said. He said he hopes the move will reduce, rather than increase illegal trafficking in cigarettes.

Megna said the state will provide an intentionally inflated estimate of how many cigarettes are smoked by Indians so most sales to non-Indians could be taxed.

Smokers rights advocates say the latest big tax increase will drive more smokers to buying from bootleggers, tribes and over the Internet. “When normally law-abiding citizens are turned into victims without redress or due process they will turn to one form or another of civil disobedience — a protest that has a long and distinguished history in the face of acts that are abusive,” said Audrey Silk of the smokers’ rights group New York City CLASH. “Count on it.”

Paterson had previously proposed an increase of $1 per pack to help fund health programs. The Senate’s Democratic majority said it is reviewing the details. The Assembly majority had already proposed a $1 per pack tax and Assembly Speaker Sheldon Silver has said he expects agreement to increase taxes on the other tobacco products, too.